Hanover approves 38 percent property-tax hike

The borough says the money is needed to fund police and fire services.

Despite a personal plea from state Rep. Dan Moul, the Hanover Borough Council Wednesday night approved a 38-percent property tax increase for next year and voted to advertise its proposed $30.2 million 2013 budget.

The council voted, 8-1, to raise the real estate tax rate by 1.51 mills, setting the rate for next year at 5.50 mills. The increase would mean an additional $250.51 yearly in taxes for the owners of a $165,900 house, which is the average value of a home in the borough. Taxes for that house would increase from $661.94 per year to $912.45.

Moul, who lives in Conewago Township, said he owns rental property in the borough and was concerned about his tenants. He questioned why the borough needed such a significant increase and said it would hurt those in the community who can least afford it.

"People are living hand to mouth. People that are lucky enough to have jobs are living paycheck to paycheck," said the Republican lawmaker.

Moul said the 38-percent increase, along with proposed water-rate hikes and higher taxes on the county level, would force him to raise rental rates.

"We've got to pass that along to some of the poorest people in our community," he said.

Moul asked the council to table the increase in order to re-examine the budget "to see where we can trim some spending."

But Borough Manager Barb Krebs said the council had been over the budget many times and was at the point where an increase was unavoidable without cutting services.

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She pointed out it is the first time in nine years the borough will raise taxes.

"The council did a good job of holding off raising taxes until this point," Krebs said. "We cut every possible place we could cut. Unfortunately, we have to raise this year."

She said the borough avoided a tax increase in recent years by pulling money from other accounts, including its cash reserve fund. The borough used roughly half of its $2.6 million in reserve funds this year to balance the 2012 budget, Krebs said. Those funds are needed early in the year to meet payroll before taxes comes in to the borough.

Even with the tax increase, Krebs said, the borough will still need to dip into that reserve fund to make ends meet next year.

With the tax hike, the borough expects to generate $5 million in real-estate taxes in 2013.

That money, Krebs said, is specifically designated to cover police and fire services, which is projected to cost the borough $5.36 million.

"Without raising the taxes, we'd have to cut services," Krebs said.

Driving the need for the increase is a $547,500 rise in health insurance costs, wages and pensions. The borough faces a 20-percent increase in insurance premiums and employee contracts call for a 3½-percent wage increase for firefighters, 3 percent for police personnel, public works and office employees, and a 2½-percent raise for water department workers.

Moul questioned whether borough employees should be getting those raises since the consumer price index is rising only about 1 percent.

Krebs said employees agreed to make concessions in their health benefits to slightly offset those premium increases.

She also pointed out state funding for many items, such as the libraries, recycling and grants have been cut, while the borough is mandated to do a number of projects, including upgrades to the sewer lines and the wastewater treatment plant.

"You, as a representative, know there are a lot of mandates out there," Krebs said.

Moul said he was concerned the increase was coming all at once.

"It's such a big jump at one time," he said. "To raise this 38 percent in one shot could be devastating to them, people that live on the edge."

Councilwoman Heidi Hormel voted against the tax increase, saying she was not given enough information during budget meetings.

"I know we need an increase. I feel I didn't have enough information on it at our last finance meeting," she said.

The proposed budget will be available for public review at the borough office building, and council is scheduled to take a final vote at its Dec. 26 regular meeting.